standstillagmt.htm

Exhibit 99.1

Execution Copy

STANDSTILL AGREEMENT

This Standstill Agreement (this “Agreement”) is entered into as of March 12, 2009, by and among Bancorp Rhode Island, Inc., a Rhode Island corporation (the “Company”), and each of Financial Edge Fund, L.P., Financial Edge-Strategic Fund, L.P., PL Capital/Focused Fund, L.P., Goodbody/PL Capital, L.P., Goodbody/PL Capital, LLC, PL Capital Advisors, LLC, PL Capital, LLC, John W. Palmer and Richard J. Lashley (each a “PL Capital Party” and collectively the “PL Capital Parties”). Except as the context otherwise requires, all capitalized terms shall have the meaning as defined in Section 1.1 hereof.

RECITALS

WHEREAS, on February 4, 2009, the PL Capital Parties filed an amendment to their Schedule 13D with the SEC reporting that the PL Capital Parties were the beneficial owners of 378,631 shares of the Common Stock and that they planned to cause the submission of certain shareholder proposals to be presented to the Company’s shareholders for consideration at the Company’s 2009 Annual Meeting of Shareholders (the “Meeting”);

WHEREAS, on February 16, 2009, Richard J. Lashley, a PL Capital Party, sent written notice to the Company, pursuant to Section 2.03 of the Company’s By-Laws, of his intent to bring six proposals before the Meeting to be voted upon by the Company’s shareholders (the “Written Notice”);

WHEREAS, the Board has determined to adopt a Majority Voting Policy to be effective for the Meeting and to reduce the number of directors from fifteen (15) to twelve (12) directors over three years (the “Governance Changes”);

WHEREAS, in view of the decision of the Board with respect to the Governance Changes, the PL Capital Parties have agreed to withdraw the Written Notice; and

WHEREAS, the Company and the PL Capital Parties desire to establish in this Agreement certain agreements and restrictions between the parties.

AGREEMENT

NOW THEREFORE, the parties do hereby agree as follows:

ARTICLE I

DEFINITIONS AND CONSTRUCTION

1.1 Definitions. Except for the names of the parties hereto (which shall be referenced herein as defined above), the following capitalized terms used in this Agreement shall, unless the context otherwise requires, have the following meaning:

“Affiliate” of a specified person is a person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

“Board” means the Board of Directors of the Company.

“Common Stock” means the Company’s common stock, $.01 par value per share.

“Consent” means any consent, approval, waiver, agreement, license, or report or

notice to, any Person.

“Exchange Act” means the Securities Exchange Act of 1934, as amended

“Governmental Approval” means any consent, approval, authorization, waiver, permit, concession, franchise, agreement, license, exemption or order of, declaration or filing with, or report or notice to, any Governmental Authority.

“Governmental Authority” means any federal, state, local or foreign court, legislative, executive or regulatory authority or agency.

“Law” means all applicable provisions of all (a) constitutions, treaties, statutes, laws (including the common law), codes, rules, regulations, ordinances or orders of any Governmental Authority, (b) Governmental Approvals and (c) orders, decisions, injunctions, judgments, awards and decrees of or agreements with any Governmental Authority.

“Person” means any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization, government or department or agency of a government.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

1.2 Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Terms defined in the singular shall include the plural, and vice versa, and pronouns in any gender shall include the masculine, feminine, and neuter, as the context requires. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word “including” shall mean including without limitation, and use of the term "or" is not intended to be exclusive, unless the context clearly requires otherwise. All references to a “Section” refer to this Agreement, and all references to an “Exhibit” refer to the documents attached to this Agreement, unless the context otherwise requires.

ARTICLE II

SHARES SUBJECT TO AGREEMENT

The shares of Common Stock subject to this Agreement are all shares of Common Stock beneficially owned (as determined pursuant to Rule 13d-3 of the Exchange Act) by the PL Capital Parties as of the date of this Agreement, together with any other shares of voting capital stock of the Company hereafter acquired and beneficially owned by the PL Capital Parties (collectively referred to herein as the “PL Capital Shares”).

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE PL CAPITAL PARTIES

The PL Capital Parties represent and warrant to the Company as follows:

3.1 Authorization. The PL Capital Parties each have the requisite power, authority and legal capacity to execute, deliver and perform and to consummate the transactions contemplated by this Agreement. The PL Capital Parties each have duly executed and delivered this Agreement. This Agreement constitutes the legal, valid and binding obligations of the PL Capital Parties, enforceable against them in accordance with its terms.

3.2 No Conflicts; Consents. The execution, delivery and performance by the PL Capital Parties of this Agreement and the consummation of the transactions contemplated by this Agreement do not conflict with, contravene, result in a violation or breach of or default under (with or without the giving of notice or the lapse of time or both), or give rise to a claim or right of termination, amendment, modification, vesting, acceleration or cancellation of any right or obligation or loss of any material benefit under any Law applicable to the PL Capital Parties or any material contract, agreement, or instrument to which any of the PL Capital Parties are a party. No Consent of any Governmental Authority or other person is required to be obtained by any of the PL Capital Parties in connection with the execution and delivery by the PL Capital Parties of this Agreement.

3.3 The PL Capital Shares. Each PL Capital Party, or together with any other PL Capital Party, has the sole right to vote the PL Capital Shares held by such party, and none of the PL Capital Shares are subject to any agreement, arrangement or restriction with respect to the voting of such shares, except as contemplated by this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the PL Capital Parties as follows:

4.4 Existence. The Company is duly organized, validly existing, and in good standing under the laws of the State of Rhode Island and is duly authorized to conduct business and enter into contracts under the laws of the State of Rhode Island.

4.5 Authorization. The Company has full power and authority to execute and deliver this Agreement, and to perform its obligations hereunder, and such execution, delivery, and performance are duly authorized by all necessary corporate action of the Company. This Agreement constitutes the valid and legally binding obligation of the Company, enforceable in accordance with its terms and conditions.

4.6 No Conflicts; Consents. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated by this Agreement do not conflict with, contravene, result in a violation or breach of or default under (with or without the giving of notice or the lapse of time or both), or give rise to a claim or right of termination, amendment, modification, vesting, acceleration or cancellation of any right or obligation or loss of any material benefit under any Law applicable to the Company or any material contract, agreement, or instrument to which the Company is a party. No Consent of any Governmental Authority or other person is required to be obtained by the Company in connection with the execution and delivery by the Company of this Agreement.

ARTICLE V

COVENANTS OF THE PL CAPITAL PARTIES

5.1 Voting for Company Proposals. From the date of this Agreement and continuing through the third business day following the date on which the Company files its Quarterly Report on Form 10-Q for the quarter ending September 30, 2009 with the SEC (the “Termination Date”), the PL Capital Parties hereby agree:

(a) that at the Meeting the PL Capital Parties shall vote (or cause to be voted) the PL Capital Shares in favor of the directors nominated by the Board for election to the Board;

(b) that on matters at the Meeting not involving the election of directors of the Company (which for the Meeting will be limited to approval of (i) a 25,000 share increase in the number of shares of Common Stock reserved for issuance under the Company's Amended and Restated Non-Employee Director Stock Plan, (ii) a “Say on Pay” proposal regarding executive compensation and (iii) ratification of the appointment of KPMG LLP as independent registered public accounting firm for the Company), to vote all of the PL Capital Shares in the manner recommended by the Board;

(c) not to seek to remove or support anyone else in seeking to remove, without cause, any member of the Board, or encourage any other Person to do so; and

(d) not to nominate or recommend a candidate for election to the Board, provided that the PL Capital Parties may submit suggestions for nominees to the Governance and Nominating Committee pursuant to the nomination policy adopted by the Board.

The PL Capital Parties will use their reasonable best efforts to cause their respective Affiliates to be bound by and comply with the provisions of this Section 5.1.

5.2 Standstill. From the date of this Agreement and continuing until the Termination Date (the “Standstill Period”), except pursuant to a transaction approved by the Board, the PL Capital Parties and their respective Affiliates will not, in any manner, directly or indirectly:

(a) make, effect, initiate, cause or participate in (i) any acquisition of beneficial ownership of any securities of the Company, (ii) any acquisition of any assets of the Company or its subsidiaries, (iii) any tender offer, exchange offer, merger, business combination, recapitalization, restructuring, liquidation, dissolution or extraordinary transaction involving the Company or its subsidiaries, or involving any securities or assets of the Company or its subsidiaries or (iv) any “solicitation” of “proxies” (as those terms are used in the proxy rules of the SEC promulgated pursuant to Section 14 of the Exchange Act) or consents with respect to any securities of the Company;

(b) form, join or participate in a “group” (as defined in Section 13(d)(3) of the Exchange Act, and the rules promulgated thereunder), pooling agreement, syndicate or voting trust with respect to the beneficial ownership of any securities of the Company, or otherwise act in concert with another shareholder of the Company for the purpose of acquiring, holding, voting or disposing of the Company’s securities;

(d) take any action which would require the Company, in the reasonable opinion of counsel, to make a public announcement regarding any of the types of matters set forth in clause “(a)” of this Section 5.2;

(e) agree or offer to take, or encourage or propose (publicly or otherwise) the taking of, any action referred to in clauses “(a)”, “(b)”, “(c)” or“(d)” of this Section 5.2;

(f) assist, induce or encourage any other Person to take any action referred to in clauses “(a)”, “(b)”, “(c)” or “(d)” of this Section 5.2;

(g) enter into any discussions or arrangements with any third party with respect to the taking of any action referred to in clauses “(a)”, “(b)”, “(c)” or “(d)” of this Section 5.2;

(h) vote the PL Capital Shares in favor of, or initiate, propose or otherwise solicit shareholders of the Company for the approval of one or more shareholder proposals or induce or attempt to induce any other individual, firm, corporation, partnership, or other entity to initiate any shareholder proposal;

(i) otherwise act, alone or in concert with others, to encourage, facilitate, incite, or seek to cause others to withhold votes for the directors nominated by the Board in any election of directors of the Company; or

(j) other than in connection with enforcement of the PL Capital Parties’ rights under this Agreement, otherwise act, alone or in concert with others, to encourage, facilitate, incite, or seek to cause others to instigate legal proceedings against the Company, or any of its subsidiaries or their respective officers, directors, or employees.

Notwithstanding any other provision of this Section 5.2, the restrictions on the acquisition of any of the Company’s securities contained in clause (i) of Section 5.2(a) hereof shall be from the date of this Agreement until the date immediately following the Meeting and any adjournment thereof, provided that in no event during the Standstill Period shall the PL Capital Parties acquire in the aggregate beneficial ownership of more than 9.9% of any class of the Company’s securities.

5.3 Withdrawal of PL Capital Proposals. Upon the execution of this Agreement by the PL Capital Parties and the Company, the PL Capital Parties shall be deemed to have withdrawn any and all proposals intended to be submitted at the Meeting and any notice given pursuant to Section 2.03 of the Company’s By-Laws or under any applicable rules or regulations of the Federal securities laws, including without limitation Rule 14a-8 of the Exchange Act, of the PL Capital Parties’ intent to submit any proposals at the Meeting shall be null and void.

5.4 Transferees to be Bound. Any transferee of any of the PL Capital Shares beneficially owned by any of the PL Capital Parties shall acknowledge and agree to be bound by the terms of this Agreement; except that the terms of this Section 5.4 shall not be binding on any transfer of any of the PL Capital Shares made in a “brokers’ transaction” as such term is defined in Section 4(4) of the Securities Act and Rule 144(g) of the Securities Act. Any sale or transfer of the PL Capital Shares not in compliance with the terms and conditions of this Section 5.4 shall be null and void.

ARTICLE VI

COVENANTS OF THE COMPANY

6.1 Majority Voting Policy. Prior to the Meeting, the Board shall take the necessary actions to adopt a majority voting policy with respect to the election of directors of the Company in uncontested elections substantially in the form attached hereto as Exhibit A. This policy shall be in effect commencing with the Meeting.

6.2 Decrease in Size of Board of Directors. Commencing with the Meeting, the Board shall take the necessary actions to decrease the size of the Board from fifteen (15) directors to twelve (12) directors as follows:

(a) At or prior to the Meeting, the Board shall take the necessary action to decrease the size of the Board from fifteen (15) directors to fourteen (14) directors;

(b) At or prior to the 2010 Annual Meeting of the Shareholders of the Company, the Board shall take the necessary action to decrease the size of the Board to no more than thirteen (13) directors; and

(c) At or prior to the 2011 Annual Meeting of the Shareholders of the Company, the Board shall take the necessary action to decrease the size of the Board to no more than twelve (12) directors.

Notwithstanding the above, the Company shall not be bound by the terms of this Section 6.2 in the event the Company consummates any merger, consolidation or other business combination requiring the approval of its shareholders under applicable Rhode Island law or NASDAQ Marketplace Rules and the terms of such transaction require an increase in the size of the Board.

6.3 Reimbursement of Expenses. The Company agrees to reimburse the PL Capital Parties for their out-of-pocket expenses incurred in connection with the PL Capital Parties’ intent to submit certain proposals at the Meeting as set forth the Written Notice and the negotiation and preparation of this Agreement, in an amount not to exceed $30,000. Such amount shall be payable by the Company within five (5) business days following the later of (a) receipt of invoices, receipts or other supporting documents evidencing such expenses and (b) the date of this Agreement.

ARTICLE VII

GENERAL PROVISIONS

7.1 Non-Disparagement. During the Standstill Period, neither the Company nor any of the PL Capital Parties shall directly or indirectly make or issue or cause to be made or issued any disclosure, announcement, or statement (including without limitation the filing of any document or report with the SEC or any other governmental agency unless required by law or any disclosure to any journalist, member of the media, or securities analyst) concerning the other party or, with respect to the Company, any of its past, present or future directors, officers, employees or other affiliates, which disparages such other party or any of such other party's respective past, present, or future directors, officers, employees or other affiliates.

7.2 Fees and Expenses. Except as contemplated by this Agreement, all costs and expenses incurred in connection with this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such expenses.

7.3 Disclosure of Agreement. The parties contemplate that the PL Capital Parties will file with the SEC an amendment to their Schedule 13D with respect to the Company attaching this Agreement and that the Company will file with the SEC a current report on Form 8-K attaching this Agreement. Except as required by applicable SEC rules and regulations or NASDAQ Marketplace Rules applicable to the Company, or any factually correct summary of the terms of this Agreement included in the aforementioned filings or any press release by the Company regarding the entering into and/or terms of this Agreement, the parties agree during the Standstill Period that there will be no other public comments by the parties regarding this Agreement.

7.4 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable.

7.5 Entire Agreement. This Agreement (including the documents set forth in

any exhibits hereto) contains the entire understanding of the parties with respect to the transactions contemplated hereby.

7.6 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more of the counterparts have been signed by each party and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

7.7 Notices. All notices, consents, requests, instructions, approvals and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) if personally delivered; (b) if sent by telecopy or facsimile (except for legal process); or (c) if mailed by overnight or by first class, certified or registered mail, postage prepaid, return receipt requested, and properly addressed as follows:

To the Company:

Bancorp Rhode Island, Inc.

One Turks Head Place

Providence, Rhode Island 02903

Attn: Merrill W. Sherman, President & CEO

Facsimile: (401) 456-5065

with a copy to:

Margaret D. Farrell, Esq.

Hinckley, Allen & Snyder LLP

50 Kennedy Plaza, Suite 1500

Providence, Rhode Island 02903

Facsimile: (401) 277-9600

To the PL Capital Parties:

PL Capital, LLC

20 East Jefferson Avenue

Suite 22

Naperville, IL 60540

Attn: John Wm. Palmer

Facsimile: (630) 848-1342

with a copy to:

Peter D. Fetzer, Esq.

Foley & Lardner LLP

777 East Wisconsin Avenue

Milwaukee, WI 53202

Facsimile: (414) 297-4900

Such addresses may be changed, from time to time, by means of a notice given in the manner provided above. Notice will conclusively be deemed to have been given when personally delivered (including, but not limited to, by messenger or courier); or if given by mail, on the third day after being sent by first class, certified or registered mail; or if given by Federal Express or other similar overnight service, on the date of delivery; or if given by telecopy or facsimile machine during normal business hours on a business day, when confirmation of transmission is indicated by the sender’s machine; or if given by telecopy or facsimile machine at any time other than during normal business hours on a business day, the first business day following when confirmation of transmission is indicated by the sender’s machine. Notices, requests, demands and other communications delivered to legal counsel of any party hereto, whether or not such counsel shall consist of in-house or outside counsel, shall not constitute

duly given notice to any party hereto.

7.8 Amendments; Waivers, etc. No amendment, modification or discharge of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in writing and duly executed by the party against whom enforcement of the amendment, modification, discharge or waiver is sought. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the party granting such waiver in any other respect or at any other time. Neither the waiver by any of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure by any of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights or privileges hereunder. The rights and remedies of any party based upon, arising out of or otherwise in respect of any inaccuracy or breach of any representation, warranty, covenant or agreement or failure to fulfill any condition shall in no way be limited by the fact that the act, omission, occurrence or other state of facts upon which any claim of any such inaccuracy or breach is based may also be the subject matter of any other representation, warranty, covenant or agreement as to which there is no inaccuracy or breach.

7.9 Further Assurances. The PL Capital Parties and the Company agree to take, or cause to be taken, all such further or other actions as shall reasonably be necessary to make effective and consummate the transactions contemplated by this Agreement.

7.10 Successors and Assigns. All covenants and agreements contained herein shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.

7.11 Governing Law. This Agreement, and the rights of the parties hereunder, shall be governed by and construed in accordance with the laws of the State of Rhode Island without reference to its conflicts of laws rules.

7.12 Venue. The parties hereby agree that all actions or proceedings arising directly or indirectly hereunder, whether instituted by the PL Capital Parties or the Company, shall be litigated in courts having situs within the State of Rhode Island, County of Providence, and the each of the parties hereby expressly consents to the jurisdiction of any local, state or federal court located within said state and county, and consent that any service of process in such action or proceeding may be made by personal service upon the parties wherever such parties may be located, respectively, or by certified or registered mail directed to the parties at his/its last known address. The parties hereby waive any objection based on forum non conveniens and any

objection to venue of any action instituted hereunder.

7.13 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OR ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO

THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

[Signatures Appear on Following Page]

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above.

COMPANY:

Bancorp Rhode Island, Inc.

By: /s/ Merrill W. Sherman

Name: Merrill W. Sherman

Title: President & CEO

PL CAPITAL PARTIES:

Financial Edge Fund, L.P.

By: PL Capital, LLC, its General Partner

By: /s/ John W. Palmer

Name: John W. Palmer

Title: Managing Member

By: /s/ Richard J. Lashley

Name: Richard J. Lashley

Title: Managing Member

Financial Edge-Strategic Fund, L.P.

By: PL Capital, LLC, its General Partner

By: /s/ John W. Palmer

Name: John W. Palmer

Title: Managing Member

By: /s/ Richard J. Lashley

Name: Richard J. Lashley

Title: Managing Member

PL Capital/Focused Fund, L.P

[Signature Page to Standstill Agreement]

PL Capital/Focused Fund, L.P.

By: PL Capital, LLC, its General Partner

By: /s/ John W. Palmer

Name: John W. Palmer

Title: Managing Member

By: /s/ Richard J. Lashley

Name: Richard J. Lashley

Title: Managing Member

Goodbody/PL Capital, L.P.

By: Goodbody/PL Capital, LLC, its General Partner

By: /s/ John W. Palmer

Name: John W. Palmer

Title: Managing Member

By: /s/ Richard J. Lashley

Name: Richard J. Lashley

Title: Managing Member

Goodbody/PL Capital, LLC

By: /s/ John W. Palmer

Name: John W. Palmer

Title: Managing Member

By: /s/ Richard J. Lashley

Name: Richard J. Lashley

Title: Managing Member

[Signature Page to Standstill Agreement]

PL Capital Advisors, LLC

By: /s/ John W. Palmer

Name: John W. Palmer

Title: Managing Member

By: /s/ Richard J. Lashley

Name: Richard J. Lashley

Title: Managing Member

PL Capital, LLC

By: /s/ John W. Palmer

Name: John W. Palmer

Title: Managing Member

By: /s/ Richard J. Lashley

Name: Richard J. Lashley

Title: Managing Member

/s/ John W. Palmer

John W. Palmer

/s/ Richard J. Lashley

Richard J. Lashley

[Signature Page to Standstill Agreement]

Exhibit A

Form of Majority Voting Policy

BANCORP RHODE ISLAND, INC.

MAJORITY VOTING POLICY

Commencing with the Bancorp Rhode Island, Inc. (the “Company”) 2009 director nominations and elections, this Majority Voting Policy shall go into effect for the Company. As a requirement of nomination and in accordance with RIGL §7-1.2-802 and any successor statute, each director nominee of the Company shall tender his or her irrevocable resignation as a director of the Company and Bank Rhode Island, the Company’s wholly-owned subsidiary (the “Bank”), which resignations shall be conditioned upon the director receiving a Majority Withhold Vote (as defined below) for election to the Company’s Board of Directors (the “Board”). The Board shall nominate for election as a director only candidates who agree to tender such irrevocable resignations that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which they face election, and (ii) Board acceptance of such resignation.

In the case of an uncontested election of directors, if a Company nominee for election as a director of the Company receives more “Withhold” votes than “For” votes (a “Majority Withhold Vote”), the nominee’s resignation from the Company shall be delivered for consideration by the Company’s Governance and Nominating Committee (the “Committee”) and the Board. An uncontested election shall be any election of directors at which the number of nominees for election does not exceed the number of positions on the Board to be filled by election at the meeting, and shall include any election where (i) by the record date for the meeting, none of the Company’s shareholders have provided the Company with notice of an intention to nominate one or more candidates to compete with the Board’s nominees in a director election for the meeting, or (ii) the Company’s shareholders have withdrawn all such nominations by the day before the Company mails its notice of meeting to shareholders in connection with any meeting at which directors are to be elected. In a contested election, this Majority Voting Policy shall not apply and nominees shall be elected by plurality voting.

Abstentions will not be considered in the determination of a Majority Withhold Vote.

The following procedures shall apply when considering any director resignation tendered in connection with a Majority Withhold Vote:

The Committee shall promptly consider such tendered resignation and recommend to the Board the action to be taken with respect to such tendered resignation. The recommendation of the Committee may be, among other things, to (i) accept the resignation; (ii) defer acceptance of the resignation until a replacement director with certain necessary qualifications held by the subject director can be identified and elected to the Board; (iii) reject the resignation, but address what the Committee believes to be the underlying reasons for the failure of the director to be re-elected; (iv) reject the resignation, but resolve that the director will not be re-nominated in the future for election; or (v) reject the resignation. If the Committee recommends that the Board accept the tendered resignation, the Committee shall also recommend to the Board whether to fill the vacancy resulting from the resignation or to reduce the size of the Board.

A-1

In considering a tendered resignation, the Committee is authorized to consider all factors it deems relevant to the best interests of the Company and its shareholders, including (i) any stated reasons why shareholders voted “withhold” with respect to the subject director; (ii) what the Committee believes to be the underlying reasons for the Majority Withhold Vote, including whether these reasons relate to the incumbent director’s performance as a director; whether these reasons relate to the Company or another company; and whether these reasons are curable and alternatives for effecting any cure; (iii) the tenure and qualifications of the director; (iv) the director’s past and expected future contributions to the Company; (v) the other policies of the Board; (vi) the overall composition of the Board, including whether accepting the resignation would cause the Company to fail to meet any applicable requirements of the Securities and Exchange Commission, the NASDAQ Stock Market or any other regulatory or self-regulatory requirements; and (vii) whether the resignation of the director could result in the triggering of change in control or similar provisions under any contract by which the Company is bound or any benefit plan of the Company and, if so, the potential impact thereof.

The Board will act on the recommendation of the Governance and Nominating Committee no later than 90 days following certification of the shareholder vote for the shareholders’ meeting at which the director received a Majority Withhold Vote. In considering the Committee’s recommendation, the Board is authorized to consider the information and factors considered by the Committee and any additional information and factors as the Board deems relevant to the best interests of the Company and its shareholders. In the event the Board determines to accept any director’s resignation from the Board in connection with this Majority Voting Policy, such director’s resignation from the Bank’s Board of Directors shall also be accepted. Following the Board’s decision, the Company will promptly file a Current Report on Form 8-K or issue a press release describing the Board’s decision and providing an explanation of the process by which the decision was reached and, if applicable, the reasons for rejecting the tendered resignation.

Any director who receives a Majority Withhold Vote will not participate in the Committee’s or the Board’s consideration of his or her tendered resignation provided that any director may provide to the Committee and/or the Board any information or a statement he or she deems relevant to the Committee’s and/or the Board’s consideration of his or her tendered resignation.

In the event that a majority of the members of the Committee receive a Majority Withhold Vote, then, a committee comprised of all independent directors, which shall be appointed by the Board, shall consider and act upon the tendered resignations in accordance with the factors described above; provided that each independent director required to tender his or her resignation pursuant to this Majority Voting Policy shall recuse himself or herself from consideration of his or her resignation.

The Board believes this policy enhances its accountability to shareholders by formalizing the consequences of a Majority Withhold Vote and demonstrating its responsiveness to director election results, while at the same time protecting the long-term interests of the Company and its shareholders.

This Majority Voting Policy will be summarized in each proxy statement relating to the election of directors of the Company.

A-2